Nepal demands trade pact intact, India eyes review

Nepal demands trade pact intact, India eyes review

KATHMANDU (Reuters): Prime Minister Sher Bahadur Deuba asked
New Delhi to keep intact a trade treaty, which allows duty-free
access to most Nepali products, but India's visiting foreign
minister urged Nepal to tackle concerns over it.

Officials said on Sunday the Nepali leader and Jaswant Singh,
the first top Indian official to visit Nepal since Deuba took
office last month, discussed late on Saturday the 1996 bilateral
trade pact, which is due to expire in December.

Singh also met the new monarch, King Gyanendra, on Sunday but
details of the meeting were not disclosed.

"His Majesty the King granted audience to the Indian Foreign
Minister Jaswant Singh," a palace spokesman said.

It is customary for visiting dignitaries to meet the monarch
but the contents of the talks are not usually revealed. Nepal is
a constitutional monarchy.

"Prime Minister Deuba requested the Indian side that the
existing framework of the trade treaty should be continued,"
Foreign Ministry spokesman Gyan Chandra Acharya told Reuters.

But India, the biggest foreign investor in Nepal, believes the
pact, due for automatic extension in December, should be
reviewed.

Officials said the Indian minister urged Nepal to "accommodate
Indian concerns" over the treaty.

"But he has assured that a plan to review it would not go
against the basic spirit of the treaty," Acharya said.

The treaty provides duty-free access to unlimited Nepali
products into India except alcohol, cosmetic and tobacco to help
the impoverished Himalayan nation boost exports.

New Delhi wants the pact reviewed because it says some Nepali
products -- hydrogenated vegetable oil, acrylic yarns, copper
wire, iron pipes and zinc oxide -- have flooded the Indian
market, hurting its industries.

It says some third-country goods were also routed to India,
with little value added in Nepal, a charge Kathmandu denies.

Total bilateral trade in 1999/2000 (mid-July to mid-July) was
63.54 billion Nepali rupees (US$846.97 million), more than double
the 30.08 billion rupees in 1996/97.

India accounts for 40 percent of Nepal's total trade, and
enjoyed a trade surplus with its cash-starved, mountainous
neighbor of 18.4 billion Nepali rupees in 1999/2000.

Singh, also the first senior Indian leader to visit Nepal
since the June 1 palace massacre in which King Birendra and nine
members of the royal family were killed, praised the kingdom for
its "forbearance" at the tragedy.

During his meeting with Nepali officials, Singh complained
about Nepal being used for anti-India activities.

Muslim militants opposed to the Indian government hijacked an
Indian Airlines aircraft leaving Kathmandu for New Delhi in late
1999.

Nepal says it would not allow its land to be used against its
giant southern neighbor.

Nepali officials also said an Indian embankment in the
northern province of Uttar Pradesh being built near the border to
control flood in rivers flowing from Nepal would threaten the
site where Buddha, founder of Buddhism, was born over 2,600 years
ago.